KUALA LUMPUR: Faced with a multitude of business disruptions arising from the Covid-19 pandemic and the Movement Control Order (MCO), many private higher-learning institutions may go bust by year end.
They were barely keeping afloat even before the measures were implemented, hoping to keep their heads above water from the enrolment of students from Sijil Pelajaran Malaysia and Sijil Tinggi Persekolahan Malaysia in March, when the pandemic ground everything to a halt in an unprecedented manner.
Malaysian Association of Private Colleges and Universities (Mapcu) president Datuk Dr Parmjit Singh told the New Straits Times that up to 100, or one-fifth of the 440 private higher education institutions nationwide, were at risk of closure this year.
Sources within the Education Ministry also corroborated this, saying 49 per cent of the institutions in the country had been making continuous losses over a three-year period from 2016.
Checks revealed that some universities and colleges were already laying off workers, while others had imposed significant pay cuts as enrolments dropped tremendously.
Higher Education Management specialist Dr Geoffrey Williams, in a research, found that private universities and university colleges were already in dire straits in 2018, with 64 per cent facing critical debt problems.
Of this, around half the institutions were technically insolvent. They were bleeding up to RM50 million and RM400 million, respectively, in annual and cumulative losses.
"Even in 2018, those recording the smallest losses were fluctuating around breaking even, making them extremely susceptible to shocks like MCO," said the HELP University professor in an exclusive interview recently.
The study by Williams and his team in the Penang Institute in 2015 was updated twice in 2018 and this year (based on modelling). It scrutinised financial statements of 75 out of some 100 universities and university colleges nationwide, from 2007 to 2018.
Taking the MCO into account, it projected that 97 per cent of institutions nationwide would be making losses this year, and 51 per cent of these entities in the red would become insolvent. It also analysed the impact of a 33 per cent reduction in income, with no reduction in liabilities or staff cost.
"Our studies showed that a five per cent drop in revenue would turn 70 per cent of Malaysia's private higher learning institutions into loss-making entities, while a 10 per cent loss of income would mean that all Malaysian foreign branch campuses would operate in the red. With a 15 per cent drop, more than half of Malaysia's private higher learning institutions would become insolvent."
He said while the MCO had hit institutions hard, the problems were systemic and intrinsically linked to poor management.
"The main factors include incompetent top-level management, often inexperienced or hard-headed vice-chancellors and board members who have ignored warnings," he said, adding that the same bad managers were now panicking following the adverse effects of the MCO due to a lack of contingency plans.
"There is also over-dependence on fees from PTPTN (National Higher Education Fund Corporation) loans, a repeated refusal to diversify revenue as well as having unimaginative course offerings. Everyone is fighting in the same red ocean. There is no innovation and they continue to offer the same courses for a market that has moved on."
And while issues draw out, the increasingly taxed faculty members are further squeezed with significantly deteriorating contractual terms.
He said reports of widespread dismissals, non-renewal of contracts and dramatically falling rates for adjunct, coupled with session and hourly lectures across the industry during the MCO period, were some of the more severe extensions of what was going on before.
"There is no security of tenure, with respect for experience and qualifications all but vanished in most institutions."
Williams said the standard rate for lectures were now RM120 per class across the board, a drop from the previous rate of between RM150 and RM250 for undergraduate and postgraduate classes, respectively.
"Professors could make more money selling coffee to 30-plus students than teaching them for RM120," he said, adding that the earlier rate had been effective as far back as 2014 before the dip.
"And the financial distress has ratcheted down working conditions of academics, turning it into a zero-hour industry due to remote learning.
"The low pay then affects the quality of courses and students are beginning to see this.
"Many will not return as they will find better offers at home in China, for instance," he said.
He confirmed that the mandatory imposition of online learning due to Covid-19 would also see fewer international students enrolling in local institutions.
However, Williams said a bailout for these institutions was the worst outcome.
"It shows that the universities are in trouble. Only last year, private universities were deemed recession proof by the Education Ministry."
He also deemed it "immoral" to ask the government for a bailout.
"There is no case for a bailout, unless it goes directly to students and struggling faculty members.
"There should be contingency reserves through better management, as our research showed that 40 per cent of the PTPTN loans into universities (channelled via fees) had gone into bad management.
"The money was used to pay debts, marketing fees, dividends for rich owners and salaries for failing vice-chancellors," he said, adding that such a position in a private university or university college in the country could command between RM600,000 and RM2 million a year.
Many of the learning institutions are owned by foreign investors and government-linked companies. But some private universities and almost all 350 private colleges in the country are small- and medium-scale enterprises (SMEs), and qualified for MCO aid under current government schemes.
Williams said his team's research also found a correlation between poor financial results and bad indication under the Education Ministry's SETARA rating system.
He said many private universities were not even evaluated under SETARA because their administrative staff were incompetent to the point of not submitting the paperwork.
He said universities and colleges that were struggling before the MCO might be forced to go back to the drawing board.
But a few well-led institutions had managed to weather the first phase of the MCO by adapting quickly to online learning, looking after their teaching staff and students, as well as taking the setback as a reminder to "never return to the mediocrity of the past".
"There must be a managed structural reform to allow poor performers to close down, and non-viable colleges to merge with larger, better structured universities with stable finances and (good) quality leaders.
"They can even merge with public universities and become an off-shoot (entity) for profit.
"This will create a lot of opportunities. System reform is essential and I hope (Higher Education Minister) Datuk Dr Noraini Ahmad will look into this.
"Transferring students to better institutions to protect them from the collapse of such universities must be the priority, not protecting the cash cows for rich and bad owners."